Q: With a debt-to-equity ratio to 99.4% does CNR have too much debt to continue operate successfully?
5i Research Answer:
NR’s total debt/equity is 100%, which means, CNR has one dollar of debt for every dollar of equity. We don’t think this leverage level is excessive given the stability and cash flow of the business. Also, we think net debt/EBITDA is a better metric to evaluate companies that generate consistent cash flow over the years, CNR’s net debt/EBITDA is 2.2x, moderately leveraged compared to CP and UNP of 3.2x and 2.7x, respectively. We are still very comfortable with CNR’s overall debt level.